SD Needs Real Reform, Not Con D Virtue Signaling

 A rational, Christian response to a mugging is to aid the victim while ensuring the perpetrator never repeats the crime. South Dakotans know this, which, along with Constitutional Carry, is why crime hasn’t spiked here as in so many other places across the nation. A small majority of South Dakotans, however, have voted to change the state constitution to join California and New York and allow medical mugging to continue.

I gather that supporters of Constitutional Amendment D (CAD) voted to help poor people with big medical bills, and use other Americans’ money to do it. What a deal! But Medicaid expansion really does not help the poor any more than reimbursing a mugging victim does, especially when the mugger goes unpunished, poised to strike again. It’s virtue signaling at best and at worst a capitulation to Big Sick Care.

Medicaid expansion under CAD will aid healthcare providers (HCPs), i.e., the perpetrators of the problem, the very institutions that pushed hard for expansion. Yes, HCPs should earn enough to induce them to provide healthcare services, which everyone needs to some extent or another. But do not forget that HCPs already get what a competitive market would pay them and a whole lot more besides. For a full explanation and proof, see Sean Masaki Flynn’s 2019 book, The Cure That Works.

Flynn points out that US healthcare, and unfortunately South Dakota’s too (after showing some promise before implementation of Obamacare), is much too expensive. There are no real prices, just negotiated settlements with insurers or governments. And the fee-for-service model creates a panoply of perverse incentives, including a predilection to treat symptoms but not to cure the underlying causes of illness. It’s more sick care than healthcare.

Early in 2022, my adult son was hospitalized in Sioux Falls for several days. The HCPs thankfully did not kill him, but they did not fix him either. He is still getting bills for services that may or may not have been rendered. (He is no doctor and barely remembers his emergency stay.) He was then earning a little too much to receive Medicaid yet his total cost was in the thousands. Under CAD, Medicaid would have chipped in for him but somebody else earning just over 138 percent of the federal poverty line would be in the same situation as my son, facing huge bills for “services” that may only serve the HCPs.

If South Dakotans really want to help the poor, and everyone else, with their medical bills they should compel HCPs to compete on the quality-adjusted price of their services. Then people can shop around for the best deal instead of committing themselves to pay big, convoluted, unknown bills, often for little or nothing in return.

Yes, such a radically commonsensical policy would run afoul of current federal regulations but some cities and states routinely declare themselves “sanctuaries” where federal laws do not apply. South Dakota has a long history of bucking widespread strictures on divorce, interest rate caps, residency rules, trust funds, and the like. Why not burnish that reputation for policy innovation by offering the country an example of a competitive healthcare system that, as Flynn shows, will be much cheaper and better than the one currently mandated from Washington, DC?

A Universal Basic Christmas?

 By age 4 or 5, I loathed Santa Claus because I noticed that he gave more and better toys to my poorly behaved rich playmates than to me or my little brother even though his production (slave labor?) and transportation costs (lichen for his reindeer) were de minimis and subsidized with literally tons of milk and cookies. Not long after, upon hearing Cheech and Chong’s already classic 1971 bit “Santa Claus and His Old Lady,” I unearthed the conspiracy behind the silly jolly old elf stories. Christmas gifts weren’t magical manna, they were part redistribution scheme, part potlatch, and part savings ploy. At least the consumerist vision of Christmas was, and remains, voluntary.

But now circulating is another implausible legend about economically free gifts, Universal Basic Income or UBI for short. This new legend means Christmas cash for everyone, in equal measure. (It is usually assumed to come once a month, but it could come just on Christmas, or be conceived of as a Christmas present paid in monthly installments.)

I fear that Americans are being subtly conditioned into accepting UBI through repetition of lies and half truths. As I have noted elsewhere, many in the media now label any old welfare program a “UBI pilot” and then tout how it helps its recipients, as if it were not already bloody obvious that extra cash always helps people. The stories, like this one from ABC News in San Francisco, also typically claim that recipients spend all their newfound wealth on “necessities,” as if cash isn’t fungible. The reporters are either morons, or think that their readers are.

While images of poor children having extra socks and other necessities under the Christmas tree may warm your heart as much as it does their feet, adults and even precocious children know that those resources came from somewhere. When the source is voluntary charitable donations, the real spirit of Christmas is fulfilled.

Under a real national UBI, however, the transfers become involuntary. As Aleksandra Przegalinska and I explain in Debating Universal Basic Income (Palgrave 2022), while everyone receives equal UBI payments, the money has to come from somewhere, and in most proposals that somewhere is the middle and upper classes, who end up paying more in taxes than they get from the UBI program.

Exceptions arise only when a government is blessed with something akin to magical manna, like the oil royalties that Alaska and Iran use to fund their respective UBI programs. Few governments have access to such cash cows but there is one great untapped source of revenue available to all governments – increased government efficiency.

If the U.S. government, for example, were to end its massive subsidies for the health and higher education sectors, return to systems of private instead of social security, and scale back its bloated administrative state, it could implement a UBI worth 15 percent of GDP without raising taxes any further. 

Ironically, if Uncle Sam were to bestow such a Christmas present upon the American people, instead of presenting them with more inflation and debt like Congres just did, it would unleash so much economic growth that a UBI would no longer be seen as necessary. But this frigid Christmas, most Americans would settle instead for a giant lump of coal.

"UBI Pilot" Is Another False Frame

 America’s airwaves, blogs, and podcasts are awash with praise for, and criticism of, so-called “UBI pilots.” The problem is that none of the pilot programs, which multiplied like bunnies after the Covid scare began to subside a year ago, can rightly purport to inform the debate over the likely costs and benefits of the universal basic income policy (UBI) currently pushed by proponents in the US and around the globe. Journalistic misrepresentation, whether due to economic illiteracy or incentives to promote Woke causes, threaten to pollute the policy debate over real UBI proposals.

Journalistic misrepresentation of economic policies is not entirely new but has become more prevalent in the 21st century due to declining educational standards and perverse incentives. For example, Wilma Soss (1900-1986) in Columbia University’s journalism school in the early 1920s received a solid grounding in economic and political history and theory that allowed her to forecast changes in the macroeconomy and to provide solid investment advice to millions for a quarter century (1957-1980). Her educational preparation stands in strong contrast to the weak, ideological fare spoon fed to most journalist students in the early Third Millennium AD, especially in economic matters.

Soss faced a better set of incentives, too. Her employer, NBC, did not force her to accept corporate sponsorships, which allowed her to build audience loyalty through trust. Listeners did not always agree with what Soss said on her weekly “Pocketbook News” show, but they knew that she only said what she believed. Today, by contrast, most corporate journalists have incentives to write frothy clickbait or regurgitate partisan talking points.

Soss knew, and experts today agree, that most income transfer programs are not UBI because they are not universal in the sense of being paid to everyone. San Francisco, for example, rightly calls its $1,200 monthly stipend Guaranteed Income for Transgender People, or G.I.F.T. for short, because it’s just a welfare program for low income transgenders.

Conflating UBI with welfare causes two confusions that muddle policy discussions. On the one hand, the conflation increases opposition to actual UBI proposals on false grounds. A truly universal transfer program not limited by need (or subject to gender or other tests), for example, would not necessarily entail the creation and funding of yet another huge government bureaucracy.

On the other hand, UBI “pilots,” even the few that are not means tested, provide false support for a national UBI because they are miniscule in scale, of limited duration, and funded by manna from heavenly donors. Analyses of their outcomes invariably focus on that which is seen, which is people who are better off because they have higher incomes. But that misses that a permanent largescale UBI would have to be involuntarily funded by someone.

Pilots cannot tell us how net UBI payers, those whose taxes increase more than their respective monthly stipends, would react to UBI politically or economically. They are also too short to tell us what will happen to education, employment, or birth rates. Pilot participants tend to stay employed and in school because they know the extra cash flow will soon cease but they might drop out if they believed the money was permanent.

Some pilot principal investigators have analyzed results as rigorously as the current state of social scientific inquiry allows. Others, though, clearly seek to score ideological points by claiming that recipients spend every extra dime on education and clean water. Opponents claim that the extra money just fuels alcohol, drug, and gambling addictions. In fact, money is fungible so the focus should be on how consumption patterns change as incomes increase, but economists do not need transfer pilots to study that.

Ultimately, one’s stance on UBI should not come down to the purported results of pilots, most of which come nowhere close to testing the policy that UBI proponents push. Instead, it should come down to one’s values. Should public policies support individual liberty or government collectivism? If the former, urge the government to bolster voluntary transfer programs. If the latter, why not skip UBI and go right to socialism, the results of which are well documented from long experience at scale?